Are smaller insurance companies better? [Expert Advice]

Are smaller insurance companies better? There are some advantages to using a small insurance company vs a larger car insurance company. Smaller companies may offer you more personalized service, although they may have fewer discounts.

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Gianetta Palmer is a writer for CarInsurance101.com, copywriter, and essayist. Her work has appeared in EverydayHealth.com, Healthline, and The Dyrt Magazine. She is the author of Scrunchie-Fried and writes a lot about car insurance...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific car insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life...

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Reviewed byMelanie Musson
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UPDATED: Jun 23, 2020

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Here's what you need to know...

  • Are smaller insurance companies better?  Whether you chose a large insurance company or a small one, there are pros and cons to each
  • Larger companies may have lower rates, but smaller companies may have more personalized customer service
  • Compare prices and ratings to determine which company is best for you

When shopping for auto insurance, it can be easy to overlook smaller insurance companies. Major corporations have the advertising budget to ensure people around the country know them. So what are the pros and cons of a small insurance company vs a large car insurance company?

Small car insurance companies may only be known to a few brokers, or they might operate only in one or two states. Nevertheless, there are a few benefits to buying insurance from a small company, and it’s a good idea to consider them as an option the next time you buy coverage.

You could Google car insurance to get multiple car insurance quotes.

Or, if you want the best car insurance quotes in your area, just use our free tool. Enter your ZIP to start getting cheap car insurance quotes from small and large companies alike.

By getting multiple car insurance quotes from a wide variety of companies, you can reduce the cost of your insurance and ensure you get the perfect match.

Small Insurance Companies vs Large

We are going to look at the differences in small and large car insurance companies so that you can make the best decision based on your needs. Let’s dive into the information.

How do small insurance companies work?

When you get a quote online or from an independent agent, you may not recognize some of the companies in your results. Though a handful of insurance companies hold the majority of policies, there are hundreds of smaller companies serving various niches.

Many of these are actually subsidiaries of major corporations, but a few are completely independent.

These companies may be locally based within certain communities, and you may be more likely to hear about them from a local agent than online quote sites. Local agents are likely to know the names of small car insurance companies in your area. They may even be able to provide you a list of small auto insurance companies for you to choose from.

Other things, such as whether the company is a mutual firm or publicly traded corporation, may matter to you depending on your personal preferences. You may also wish to support a company that has shared political beliefs or makes contributions to a charity you support.

Is it better to use a large insurance company or a small company?

There are pros and cons to each type of auto insurance company. Let’s take a look at some of them now.

Benefits of Major Insurers

  • They are usually more financially secure than independent small auto insurance companies
  • Often offer more innovative discounts and savings programs
  • Claims and customer service report are usually very fast and accessible 24/7
  • Companies are universally recognized, minimizing hassles having insurance validated after an accident

Drawbacks of Major Insurers

  • It’s easy to feel lost or be treated like just another number to a big profit-driven company
  • Lots of money might be spent on advertising rather than the customers
  • You’ll be supporting big business rather than a local economy, which may be important to some consumers
  • Large companies may be politically involved in things you might not support

Benefits of Smaller Companies

  • You might get more personalized attention from your agent, claims staff or other employees
  • Your money may stay within the community if the business is locally owned
  • Rates can often be much lower thanks to the company’s low overhead
  • You might be referred by a local agent that you trust or like working with

Drawbacks of Smaller Companies

  • The company may be a subsidiary of a larger firm, so you may still be supporting that corporation
  • Independent firms may not be financially stable, which can cause problems if you ever file a claim
  • Customer service can be slow and 24-hour support may be unavailable due to staffing constraints
  • There may not be as many discount programs or opportunities

You can see that each type of company has its advantages and disadvantages. The perfect company for you really depends on what is most important to you and what company offers that at the best rate.

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Factors to Look at When Choosing a Car Insurance Company

When deciding which type of insurance to get, there are a few things you should consider:

  • Price – The company with the most reasonable rates may be the most attractive option
  • Financial Strength – Companies with a poor A.M. Best ranking may have a hard time paying off claims
  • Customer Service – You don’t want to pay for a service product if the employees won’t treat you well.

For most people an insurance company’s cost, strength, and customer service are the primary reasons to obtain coverage.

Do smaller car insurance companies have better prices?

Smaller companies can charge lower rates since their costs are lower, but the downside is that they may not be able to offer as many discounts. Let’s look at how rates are figured and some discounts that might be available.

There are many factors that go into determining car insurance rates, no matter the size of the company. Things like driving history, credit rating, age, gender, and marital status are used to help companies decide how much to charge.

To show you just how much individual factors can influence rates, we will look at driving history. This table shows you how your rates increase with just one traffic ticket.

Average Annual Car Insurance Rates by Driving History
CompaniesAverage Annual Rates with a Clean RecordAverage Annual Rates with 1 accidentAverage Annual Rates with 1 DUIAverage Annual Rates with 1 speeding violation
USAA$1,933.68$2,516.24$3,506.03$2,193.25
Geico$2,145.96$3,192.77$4,875.87$2,645.43
American Family$2,693.61$3,722.75$4,330.24$3,025.74
Nationwide$2,746.18$3,396.95$4,543.20$3,113.68
State Farm$2,821.18$3,396.01$3,636.80$3,186.01
Progressive$3,393.09$4,777.04$3,969.65$4,002.28
Travelers$3,447.69$4,289.74$5,741.40$4,260.80
Farmers$3,460.60$4,518.73$4,718.75$4,079.01
Allstate$3,819.90$4,987.68$6,260.73$4,483.51
Liberty Mutual$4,774.30$6,204.78$7,613.48$5,701.26

You can save money just by obeying traffic laws. Tickets will cost you thousands in fines and higher car insurance rates.

This video discusses some other factors used to determine rates.

Discounts are another important factor to consider when choosing a car insurance company.

Many of the larger companies offer you more discounts and allow you to bundle them. Sometimes the companies with the best discounts can make your rates very low.

Some of the common discounts available are:

  • Multi-car
  • Multi-policy
  • Good driver
  • Good student
  • Car safety features
  • Occupation
  • Homeowner

Some smaller companies may be able to offer these discounts as well. Check with your company to see what is available to you.

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How are companies rated?

Insurance companies are rated by A.M. Best for financial stability and J.D. Power for customer service.

A.M. Best ratings are determined by the creditworthiness of each insurer, like Amica. The ratings weigh the financial responsibilities with the strengths of each company. These ratings can help determine which insurance company is best for paying claims and more likely to stay in business.

Since many of these companies insure more than just cars, the ratings can also help you determine who is the best insurance company for home and auto.

Many times you can even save money by using the same company for both needs.

This table shows the 10 best insurance companies from 2018. The premiums that were written, A.M. Best rating, and market share are also shown.

Top 10 Car Insurance Companies by Direct Premium Written
RankCompanyDirect Premium WrittenA.M. Best RatingMarket Share
1State Farm$41,963,578,000A++17.01
2Geico$33,075,434,000A++13.41
3Progressive$27,058,768,000A+10.97
4Allstate$22,663,214,000A+9.19
5USAA$14,467,936,000A++5.87
6Liberty Mutual$11,776,654,000A4.77
7Farmers$10,496,476,000A4.26
8Nationwide$6,726,799,000A+2.73
9Travelers$4,697,743,000A++1.9
10American Family$4,687,909,000A1.9

Who is the number 1 insurance company? According to this list, State Farm has the most premiums written, the highest market share, and one of the best-rated companies.

J.D. Power ranks companies based on customer satisfaction. The factors looked at are policy offering, price, claims, the billing process, and policy information. Rankings are determined by region across the US. This table shows you the top-ranked companies for each region in 2019.

Highest Ranked Car Insurance Companies By Region
RegionHighest Ranked Company
CaliforniaEsurance
CentralShelter
FloridaAllstate
Mid-AtlanticErie Insurance
New EnglandAmica Mutual
New YorkNew York Central Mutual
North CentralWestfield
NorthwestPEMCO Insurnace
SoutheastFarm Bureau Insurance Tennessee
SouthwestThe Hartford
TexasTexas Farm Bureau

So how do you determine what are the worst insurance companies? Many times, the determination is based on personal preference. Some people will sacrifice lower rates for customer service and vice versa.

Once you’ve narrowed down your list and researched a company’s financial standing and customer service reviews, the final decision is yours to make. The best way to decide whether an insurance company is a good choice is by reviewing it individually and matching a company to your own particular needs and preferences.

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Which company is best for you?

When shopping for insurance, your first step should be to get several quotes and determine the cheapest policies. This will enable you to narrow down your search and research only the most promising insurers.

You can get your quotes online, and you can also ask for information about different companies at a local independent agent’s office. Agencies are often more representative of small local companies than online sources since major companies can afford to pay for more online advertising, but you can still find quotes from hundreds of companies over the Internet.

By looking for reviews for the best small car insurance companies, asking around in your community, and comparison shopping between companies, you’ll get a good idea of what a company is like and whether it will serve your needs.

Whether you choose to use a small or large company, you need to compare car insurance quotes from multiple companies. Each company will offer different coverages at different rates. To start getting cheap, quick car insurance quotes enter your ZIP now.

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